Organizations from Red Cross to McDonald's use ESRItechnology to create maps and make decisions about their physical assets.

If you plotted ESRI's customers on a map with red dots, you'd see big stretches of the world blanketed in scarlet. But some wonder whether the company can hold on to its extensive empire. Founded as a land-use consulting firm in 1969, the company today claims that 300,000 organizations worldwideincluding most U.S. federal agencies and 24,000 state and local governmentsuse its technology to create maps and make decisions about their physical assets.

ESRI, whose official name is Environmental Systems Research Institute, last year held about 31% of the $1.8 billion market for geographic information systems software, according to IDC, making it the No. 1 player. "They're the big dog in the game," says David Breland, enterprise geographic information systems coordinator for power utility Southern Co., which has used ESRI software since the late 1980s to track and manage maintenance of its transmission and distribution infrastructure.

The company's software can produce sophisticated, multilayered maps that analyze all kinds of geospatial data. For example, McDonald's uses it to scope out locations for new stores, weighing demographic data like population density and income. Loomis Fargo, meanwhile, uses ESRI tools to find the optimal routes for its vehicle fleets, saving on fuel and speeding up deliveries.

Customers say ESRI (called "EZZ-ree" by many) has held the lead in the field it invented by being responsive to their needsand by delivering superior products. The American Red Cross evaluated other geographic information systems providers several years ago, but none offered data as accurate or comprehensive as did ESRI, says Greg Tune, the disaster-relief agency's lead program manager for GIS.

"With ESRI, you know you're going to get quality data," he says. "They're the industry leader. There's a trust factor there." The Red Cross used ESRI mapping software and databases this summer as part of planning and managing its response to hurricanes Katrina and Rita; for instance, it decided where to position supplies and deploy field workers based on projections of where the hurricane damage would be most severe.

For Jack Dangermond, ESRI's founder and president, the mission of the company hasn't changed in the past three decades. The aim, he says, is to build technology "that people are really attracted to." That means spending a lot of time listening to clients, he adds: "The product really has been guided by users. It's being bought, it's not being sold."

Now, however, ESRI may be at a pivotal point. It built its GIS stronghold through projects for converting paper maps to digital ones, according to IDC analyst Dave Sonnen. But these days, he says, nearly all geospatial information is created, distributed and stored electronically.

And because the three major database systemsfrom IBM, Microsoft and Oraclecan manage geographic data and generate graphical maps, ESRI risks being pushed to the periphery in an "editing function," in Sonnen's view. The U.S. Census Bureau, for example, is converting its entire geospatial database to Oracle's software. "The challenge for ESRI is to move into this era where integration of geospatial data with other processes is what users are looking for," he says. "The database guys are going to be better at managing data than anyone. That's just a fact."

Dangermond downplays the threat from database vendors. For one thing, he sees applications built with Web services supplanting database-centric ones (see sidebar). Moreover, he says, ESRI is more focused: It provides tools to analyze geospatial information as well as data culled from multiple sources, including street and weather maps, live traffic information and census dataareas the database players don't cover. "Our customers want to buy a complete GIS," he says.

Dangermond has done well by heeding their requests. Privately held ESRI doesn't release profit or loss figures but says it's profitable and debt-free. Its growth slowed two years ago, amid a broader pullback in information-technology spending, but rebounded in 2004 with $560 million in sales, up 11% from the prior year.

As top dog, though, ESRI is in a position to charge top dollar. Richland County, S.C., pays ESRI an annual maintenance fee of $56,000 for 30 client licenses. "That's not great," concedes Brian Fitzgerald, systems engineer for the county, noting that he has investigated using open-source GIS applications as an alternative.

But Richland County has stuck with ESRI, Fitzgerald says, because its software is reliable and because the company pays close attention to customer needs. "If ESRI is having problems with a particular application," he says, "the user community lets them know."

The next major push for ESRI is to "spatially enable enterprises," says company founder and president Jack Dangermond. This involves applying geographic information anywhere and everywhere it could make a business' operations more efficientnot just in individual departments.
For example, if a retailer's planning team has used ESRI tools to analyze new store locations, ESRI would like to help the customer-service group use geographic info to, say, determine where consumer complaints are arising.
The release of ArcGIS 9.0 last year is supposed to help companies take steps in that direction. The software is a set of programming libraries that allow geographic information systems functions (like generating a map) to be plugged into desktop, server or Web-based applications.
The architecture allows ESRI's core features to be made available via Web services, delivered from a server running either Java or Microsoft .NET (a network-oriented application framework), theoretically making it much easier to get map-related information into Web-based applications. "Now we basically have products that run anywhere," Dangermond says.
Also on tap: Version 9.2 of ArcGIS, to be available in the first quarter of 2006, which will provide 3D map views (similar to Google's Earth application), along with topographical data to generate them. "You'll be able to put up maps on the Web and fly around them," Dangermond says.